You do not necessarily need a better product
to get a better price ! Here's Why ..
We all would like love to improve our margins and get a better price from the market but the question is how? Offering a better product is an obvious answer but it does not always work. Your customers are not always in the need of a better product. Then, what are they in need of that will make them pay a better price? Here is a list ... pick what fits you ! In each case, I have given examples too hoping that some of these will ring a bell !
to get a better price ! Here's Why ..
But be clear who your customer is.
Is he end-user ? Applicator? Recommender? Trader? Salesman?
Your answers will change ..
- Some customers pay more if you provide more FACILITIES
People visit restaurants not only for good food but also for more parking space. Facilities are in the nature of more space, more specious, less crowded, cleaner etc . Payment facilities - cash, card, EMI, lease - are important.Some will pay more for door delivery - Some customers pay more for ACCESS to someone they like to interact.
People visit those exhibitions where they meet the type of people they want to meet. People want to join those clubs whose members they are keen on mixing with. People buy tariff plans of those cell networks who cater to their friends. People become members of the social networks frequented by their friends. - Some customers pay more for SERVICE
People pay more to DHL because of their service of net-enables "parcel tracking service".People choose insurance company only on premium but one which settles claims faster. Lot of market share of Maruti Suzuki is because its service network is wider and deeper. - Some customers pay more for HUMAN SERVICE / EXPERTISE / TRUST
A doctor which charges more has the reputation of curing difficult cases. A lawyer which charges more has won more cases and is more famous. The same goes for businesses where competency is more important. Tickets for a known singer's performance are at a higher price. All of us are willing to pay / wait more for our favorite hair dresser. Auto-check-in machines exist at airports and yet many wait in queue to see the agent. All of us frequent the same retailer / restaurant where we are personally recognized - Some customers pay more if it gives them the STATUS they seek
An Arrow shirt has not only better quality but the "A" on the sleeve sends out a signal. Director of Mercedes said; " 25% price is for the car, the rest is for the "star"" - Some customers pay more for SAVING THEIR PRECIOUS TIME
Shopper's Stop calls its members to inspect items on sale before others and avoid queues.Vendors with ready stock charge more but you get material fast and proceed ahead. In a money-rich and time-poor world there are many ways to charge higher prices. Pre-cut vegetables, ready-mixes of food, home delivery of foods all are time saving ways. - Some customers pay more for having a LOWER RISK
Samsung sells "extended warranty period" on its cell phones and it has a value! Customers buy steel pipes from Welspun because its quality is already certified by APPA.
By the way, it has always struck me why the students in the entrepreneurship courses do not think of simple and easy to implement ideas where money is surer, faster and safer. Why do not they think of providing facilities, access, service, expertise, status, risk reduction and time-saving to people?
17 comments:
It was very nice, with simple easy real life examples...Mahesh Ghanekar
Hello Sir,
This was good to be read because all are collated at one place and strikes once again to the mind.
Jagat Singh
SYB-05
Dear Sir,
I liked reading these. So what all of these points are basically saying is that it is the VALUE PROPOSITION that is important and not just the product. Very nice point made with good examples.
Kalpesh
EMP21
I could not understand the following "...and IF THE CUSTOMER COMES THROUGH CERTAIN KIND OF CHANNELS where the costs of operations are higher like airport outlets etc."
Nice. Are there other attributes also other than these which the customer looks for?
A simple and logical approach to defy a complicated matter. People work for life to understand these reasons and many of time end up in finding ways through bargaining. Thanks for the insight and taking to the root of the matter - VALUE CREATION AND VALUE PROPOSITION. Regards, Dinesh Garg EMP 26
Are there any other attributes too which the customer looks for? Or is this list exhaustive? Dakshes M Shah PGEMP31/A/46 sdakshes@yahoo.com, sdakshes@gmail.com
Dakshes, this is NOT exhaustive. The only point I was making was that do not think that the answer always lies in better product. Sometimes you can improve other things and people will pay you more for those things EVEN IF THE PRODUCT IS THE SAME. You probably drink the tea from the same tea powder in an average restaurant and in a 5 star hotel but you pay Rs 15 in a restaurant and Ts 150 in a 5 star hotel. That is why I said that you pay more through certain channels.
Sir,
As someone said "It is easy to complicate things but very difficult to make them simpler", Your article was very simple, easy and implementable. enjoyed reading and very useful for service industries in competitive markets.
N.Ulaganathan,
EMP 18
Excellent write up. Way points are depicted using real examples are simply great.
You have a point here. However, if one looks carefully all these points make a better product experience- whether it is the location of consumption or extended warranty. The only one that stood our and is the most difficult is to create an image - like Mercedes. Luxury marketing is very different for eg at Louis Vuitton in Paris or Dubai, you can buy only one bag at a time and you have to queue up...they let in only few customers at a time. If you want another bag you have to come back! This also creates the image !
A) as a trader, a show room owner can get a better price from the customer, if he has learnt the art of creating trust in the customer's mind. if one wants a better price, then he has to build a reputation not only about the product, but also about himself.
B) most business men look at price as the only criteria to attract the customer. it becomes necessary to provide better infrastructure, service back up, multiple choices of buying the same product (cash sales/credit sales/finance options/lease options/door delivery)
C)if you wait for a customer to inquire about a product, chances are that you would end up getting the lowest price. but if you reach the customer, rather than waiting for him to approach you; you are likely to get a better price.
D) recently i was involved in appointing a structural auditor for my residential building. among the applications, one person had given the best presentation on how he would conduct the audit, what and how he will conduct the nondestructive tests to major the reliability of the structure and how he will make repair contracts/tender documents. his quote was the highest. when we called all the parties who had quoted, he gave us the best presentation. we ended up giving him the contract, in spite of the offer being 40% higher than the next bidder.
your commandments are immensely useful and have refreshed my mind.
thanks
Raja Malushte
rajamalushte@gmail.com
Hello sir,
Some customers also pay more for comfort level/ emotional bonding provided by service provider – specially the services where human touch is required for eg. personal care centers/ parlours/ spa centers etc.
Regards,
Mamta Kulkarni (PGEMP31)
Yes, Mamta has made a good point. People do pay more for personalization - of product, experience and bonding.
Yes i do believe that it is better to not just concentrate on giving a very great product but also service , fast product delivery, expertise on the products.
i think all the 7 commandments are fullfilled customer will not be price concious
sir this was explained in preety simple way . How a same product can be sold at higher price level .
however i have one question of personal interest .
why some employees in corporate world gets better Remuneration , better profile , however some really hard working employees just get mediocre raise .
Its also about marketing ........
Dear Sir,
A late reply to this , still would like to share,
I am in the business of shipping ,offshore vessels supporting oil and gas industry ,
We face a interesting issue , all our competitors have the required expereience , Qulaity (ISO ) , excellent ships , excellent track record , have worked with best clients and unfortunately we are awarded contracts in only 2 ways :- L1 the lowest price and the other cannot mention
Even govt contracts are awarded purely on pricing , even though all are technically sound as otherwise they would be disqualified in the first place
tks Anupam , EMP 21
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